Question

Schedule C, Sole Proprietor, Gain or Loss of Car Totaled, used Partly for Business

Forum|Forum|6 years ago
March 4, 2020
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Filing Schedule C as a sole proprietor. Been using the standard mileage deduction since 2006 on a car used for business and personal (business use only about 5% a year, but varied each year). Car was totaled in August 2019. How do I calculate gain/loss and report all this in TurboTax? Here are some other numbers: Purchase price ($24,000); claimed depreciation 2006-2019 ($2,400) (calculated by pulling old tax returns and multiplying business miles times the depreciation per mile from each year!), insurance paid $7300.

And, can I use actual expenses instead of the standard mileage deduction for this year through the date of the accident?

ReginaM

Yes, you can claim actual expenses this year for your vehicle, kee in mind though you can not claim both Standard Mileage Rate and Actual Expenses for the use of a vehicle, you can claim either Standard Mileage Rate OR Actual Expenses in the same year. If you claimed both of these as indicated above you might want to consider filing amended returns for the years you claimed both.

The IRS clarifies this in Publication 463 stating that, "If you use the standard mileage rate for a year, you can’t deduct your actual car expenses for that year. You can’t deduct depreciation, lease payments, maintenance and repairs, gasoline (including gasoline taxes), oil, insurance, or vehicle registration fees."

When you have insurance and you total your vehicle, the insurance company will keep the vehicle and give you or a check for the pre-accident value of the vehicle.

If the check is made out and you are the owner of the vehicle, you need to divide the insurance proceeds between business and personal use based on mileage.

Regardless of how you deduct your vehicle (actual expense method or IRS mileage rates), you have adjusted basis, and thus gain or loss.
On the business part, you have either a taxable gain or a deductible loss.
On the personal part, you pay taxes on any gain, but you may not deduct any personal loss.

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1234512Author

Oh yes, I know it's one or the other; we've always used ONLY the standard mileage deduction, from year 1 in service! Just making sure it was OK to switch to actual expenses for 2019 INSTEAD of the standard deduction!

But how is gain/loss calculated and how does this get entered into TurboTax? Using the Car and Truck Expenses Worksheet linked to Sch C, I checked : "I stopped using this vehicle in 2019" and entered the date of the accident. Answered the relevant use questions...then skip ahead to fields asking for the Sales Price (business portion), which I think is where I should enter the business percentage of the amount insurance paid, but business percentage changed each year, do I use 2019 percentage? Next fields, TurboTax asks for Basis for Gain/Loss (enter 100% of basis) -- what figure should I use here and on the next line, AMT basis?

ColeenD3

Yes, your insurance reimbursement is the amount to use for sales price. However, the sale price page tells you to multiply the amount times business use percent. (5%)

On the page that asks: "Let's get the info on your gain or loss basis" the Learn More blue box tells you the basis is the purchase price minus depreciation, so it is $21,600 not including any depreciation you might have taken in 2019 using the actual method.